SERVE WITNESS STATEMENTS LATE AT YOUR PERIL: RELIEF FROM SANCTIONS NECESSARY AND LATE SERVICE IS NEARLY ALWAYS A SERIOUS BREACH

There are many interesting aspects of the judgment of HHJ Mithani QC in Patel & Anor v Barlows Solicitors (a firm) & Ors [2020] EWHC 2753 (Ch). Here I want to look at the part of the judgment that considers the application for relief from sanctions when witness statements were served late.   There are some important reminders about the importance of serving witness statements promptly and properly.

“It cannot be emphasised enough that the requirement to furnish a CPR-compliant statement is no empty formality, not least because there are important consequences for a witness if he says anything in it which he knows is deliberately false.”

THE CASE

The claimants were bringing an action seeking a declaration that certain moneys paid over in a settlement belonged to them in full or in part.  Some of the Defendants’ witnesses were served late.

THE JUDGMENT IN RELATION TO RELIEF FROM SANCTIONS

The judge considered an application for relief from sanctions in relation to the late serve of witness evidence.
Application for relief from sanctions concerning the Third Defendant’s witness statement
64          The Third Defendant furnished a witness statement in these proceedings dated 4 August 2020. The First Claimant, who relies upon that witness statement in support of his claim, was required by an order of this court dated 5 November 2019 to serve any written evidence upon which he intended to rely by 18 February 2020 (subsequently extended by agreement between the parties to 17 March 2020). That was not done. Instead, the First Claimant made an application for permission to serve a witness summary in respect of that evidence, which was heard by District Judge Rich over the telephone on 27 July 2020. At that hearing, the First Claimant made an application for relief from sanctions under CPR 3.9 in the face of the court.
65          The learned District Judge refused both applications with costs. However, in respect of the latter application, he went on to say, at paragraph 2 of his order:
“2.       Any further application by the Claimants for relief from sanction shall be made to the Trial Judge on notice to the Second Defendant supported by evidence setting out:
               
2.1          What steps were taken to try to obtain such a witness statement from Mr Tanna;
2.2.      What steps have been taken since 17 March 2020 to obtain such a witness statement; and
3.3       Any other reasons why the Claimants did not or were unable to obtain a witness statement from Mr Tanna prior to 17 March 2020.”
66          The application was renewed before me in accordance with paragraph 2 of the judge’s order. I heard the application over the telephone on 10 September 2020. By that time, there was a formal application for relief from sanctions before me, supported by a witness statement from Ms Anjali Narshi, the First Claimant’s solicitor, dated 6 August 2020.
67          I considered that paragraph 2 of the order enabled the First Claimant to have the application to admit the Third Defendant’s written evidence heard de novo, but could see the force of the contrary argument, which was advanced by Mr Vickery, that the District Judge had made a final determination in the matter and the application before me could not be reheard unless the First Claimant could demonstrate that: (a) there had been a material change of circumstances since the order was made; (b) the facts on which the original decision was made had been misstated; or (c) there had been a manifest mistake on the part of the judge in formulating the order: see Thevarajah v Riordan [2015] UKSC 78[2016] 1 WLR 76, at [15] and [17]-[19]; and Griffith and another v Gourgey and others [2017] EWCA Civ 926, at [11]. There was no evidence before me that any of those matters were applicable.
68          I felt that I needed clarification of what the judge meant in paragraph 2 of the order. I, therefore adjourned the application to the first day of the trial.
69          The parties’ legal representatives made enquiries of the District Judge about what he intended by the terms of paragraph 2 of the order. However, he appeared unable to assist with the matter. Nor, I was informed, would a transcript of the hearing or of his judgment help as he had not considered the specific issue in question.
70          I took the view, construing his order as a whole, that the judge appeared to be giving the First Claimant the right to renew the application before me afresh, despite his refusal of the application at the hearing on 27 July 2020. I did so because there would be no reason for the District Judge to include paragraph 2 in his order if had decided to refuse the application outright. Also, the application for relief from sanctions in respect of the Third Defendant was made in the face of the court so the District Judge may not have had the benefit of considering the application properly, hence the terms of paragraph 2.2 requiring the First Claimant to put all the relevant the material since 17 March 2020, rather than (if he had intended to make a final decision on the application) all the material since the date of the hearing, i.e. 27 July 2020, before the trial judge.
71          I granted the First Claimant relief from sanctions and said I would give reasons for my decision subsequently in order to make up for a bit of the time which we had lost in commencing the trial. I now give my reasons at paragraphs 72 to 85, below.
72          The principles governing the grant or relief from sanctions are set out in the decisions of the Court of Appeal in Mitchell v News Group Newspapers [2013] EWCA Civ 1537[2014] 1 WLR 795 and Denton v T H White Ltd [2014] EWCA Civ 906, [2014] 1 W.L.R. 3296. The guidance given in those case may be summarised as follows: a judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order” which engages CPR 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate all the circumstances of the case, so as to enable the court to deal justly with the application, including those set out CPR 3.9(1)(a) and (b).
73          The First Claimant accepts that the breach in question was not trivial. However, he maintains that it was not significant and, by reference to Ms Narshi’s above statement, sets out why this is so. What he says can be summarised in the following few points: first, the substance of what the Third Defendant had to say had already been supplied to the Second Defendants’ solicitors by email, albeit not in a form which was CPR compliant; second, Ms Narshi had wrongly believed that it was not appropriate for her to be serving a witness statement from another party to the claim where she was not acting for him; and third that she had incorrectly sought to remedy the errors in the approach she took by applying for permission to serve a witness summary in respect of the Third Defendant’s evidence, as opposed to seeking relief from sanctions. I agree with the substance of the explanation which she has provided to this extent. Much, if not most or all, of the material which ultimately made its way in the witness statement of the Third Defendant had been supplied by Ms Narshi to the Second Defendants before or soon after the deadline for exchange. However, I am unable to agree that the breach was not significant.
74          Ms Narshi appears to have wholly misconceived the nature of her functions and duties in relation to the service of the written evidence upon which the First Claimant intended to rely. In his skeleton argument on the First Claimant’s application for relief from sanctions, Mr Vickery set out why he says the reasons for the default were inadequate. I accept what he says: the First Claimant’s compliance with the requirements to serve the Third Defendant and Mr Thakrar’s witness statements was far from adequate; also, solicitors are meant to know and comply with the rules governing those requirements. In addition, it unacceptable that once a deadline is not complied with, the party in default should delay in making an application for relief from sanctions. However, in my view, the delay was minor and arose primarily because the First Claimant’s solicitors took an approach which was incorrect, rather than deliberately failed to take any steps at all to remedy the defects in the service of the witness statements.
75          In Denton itself, the court gave examples of what would constitute good reason for a breach. They included the following: (a) the fact that the defaulting party or his solicitor suffered from a debilitating illness or was involved in an accident; (b) later developments in the course of the litigation process if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal; and (c) circumstances outside the control of the party in default.
76          I do not consider the circumstances identified by Ms Narshi to constitute good reasons for the breach. As is now well-established, if some good reason is shown for the failure to comply with a rule, practice direction or order, the court will usually grant relief from any sanction imposed because of it: see, for example, Summit Navigation Ltd v Generali Romania Assigurare Reasigurare SA [2014] EWHC 398 (Comm) [2014] 1 WLR 3472;  Cranford Community College v Cranford College Ltd [2014] EWHC 349 (IPEC); and Service Insurance Co Ltd v Beacon [2014] EWHC 2435 (QB).
77          In Denton, the Court of Appeal accepted that, in many cases, a court might conclude that a breach is not serious or significant if it does not imperil future hearing dates and does not otherwise disrupt this case or litigation generally. Nevertheless, it declined to adopt this as a test of seriousness and significance, holding that some breaches are serious even though they are incapable of affecting the efficient progress of litigation. In the present case, I am unable to accept that the breaches were not significant. Although the breaches did not have any material bearing on the conduct of the case, once they took place, the way in which Ms Narshi went about rectifying them was wholly incorrect.  
78          I turn to the third stage.
79          In considering the third stage of the Mitchell and Denton test (“all the circumstances of the case”), the two matters which are specifically mentioned in CPR 3.9 are (a) the need for litigation to be conducted efficiently and at proportionate cost and (b) the need to enforce compliance with rules, practice directions and court orders and are referred to in Denton as factors (a) and (b). In Denton, the court stated that factor (a) makes it clear that the court must consider the effect of the breach in every case. If the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, that will be a factor weighing in favour of refusing relief. Factor (b) emphasises the importance of complying with rules, practice directions and orders.
80          The 2020 Edition of Civil Procedure, i.e. the White Book, states at paragraph 3.9.13:
“Where the breach in question is serious or significant, the fact that it has not imperilled the trial date will not by itself lead to the grant of relief from sanctions. Factors (a) and (b) of r.3.9(1) are still of particular importance (albeit not conclusive) in all cases where serious breaches affect the efficient progress of the litigation. In Clearway Drainage Systems Ltd v Miles Smith Ltd [2016] EWCA Civ 258, a high-value commercial claim, the claimants delayed serving any witness statements for over two months, and served them less than one month before the trial date. This delay, and a similar delay in making a formal application for relief, had caused the pre-trial review to be adjourned twice. The Court of Appeal upheld the learned judge’s decision to refuse relief from sanctions: the prolonged failure over a period of months had been viewed by the court as serious or significant even though it had not imperilled the trial date. No good reason for it had been shown. Whilst the loss of the opportunity to rely upon witness evidence (which effectively terminated the claimant’s case) clearly weighed in favour of granting relief, it did not in all the circumstances, outweigh other factors including factors (a) and (b) and the lack of promptness in the application. Clearway Drainage was distinguished in Castle Trustee Ltd v Bombay Palace Restaurant Ltd, 21 June 2017, unrep., QBD (TCC) (Jefford J). It was held that the defendant’s inability to fund its solicitors was not a good reason for its failure to comply with court directions. However, relief from sanctions was granted on the basis that the trial could proceed without any prejudice to the claimant coupled with the fact the defendant’s failure to comply with directions did not amount to a disreputable course of conduct or a deliberate flouting of the court’s orders for tactical reasons…In Gladwin v Bogescu [2017] EWHC 1287 (QB), a low value road accident claim, liability had been admitted and the claim was proceeding to a trial as to the assessment of damages, listed for 8 February 2017. Although a direction for service of witness statements by 3 November 2016 had been made, the claimant did not serve a witness statement until 5 January 2017 and did not apply for relief from sanctions until less than one week before trial. The application was made on the basis that, if relief was granted, the trial would be adjourned. In the lower court, relief from sanctions and an adjournment of the trial was granted on the basis that the sanction (no oral evidence allowed) would not prevent the claimant relying upon the witness statement as hearsay evidence, thereby depriving the defendant of the advantage of cross-examination. The defendant’s appeal against the grant of relief and the adjournment was granted and the claim was struck out. Although liability had been admitted, the additional expenses generated by an adjournment were likely to be significant bearing in mind the modest value of the claim. The non-compliance with rules and orders was                                                                    serious and no good reason for it had been given. Had the court not exercised its power to strike out under r.3.4(2)(c) it would have had ample power under r.32.1(2) to prevent the reliance on hearsay evidence in a claim in which oral evidence was prohibited.”
81          However, it then goes on to state in the same paragraph:
“Where the breach in question is serious or significant, the fact that it has not imperilled the trial date will not by itself lead to the grant of relief from sanctions. Factors (a) and (b) of r.3.9(1) are still of particular importance (albeit not conclusive) in all cases where serious breaches affect the efficient progress of the litigation. However, in considering all the circumstances of the case, the fact that the conduct of the litigation has not been imperilled is a relevant factor to be taken into account.
(My emphasis).
82          What all of this means is encapsulated by the following passage in the White Book, at paragraph 3.9.21:
“On an application for relief from sanctions, all the circumstances have to be considered but the rule makes express reference to (a) the need for litigation to be conducted efficiently and at proportionate cost and (b) the need to enforce compliance with rules, practice directions and court orders. In Denton v TH White Ltd [2014] EWCA Civ 906, [2014] 1 W.L.R. 3296, the Court of Appeal decided by a majority (Lord Dyson MR and Vos LJ) that these two factors ‘are of particular importance and should be given particular weight at the third stage when all the circumstances of the case are considered… Decisions as to whether or not to grant relief from sanctions are always discretionary and are highly case-sensitive. Appeal courts will not interfere with a lower court’s decision on such matters unless satisfied that the lower court erred in law, erred in fact or reached a conclusion which falls outside the generous ambit within which reasonable disagreement is possible… The fact that “other circumstances” may influence the court’s decision even where the two specified factors militate in favour of refusing relief may be taken as an indication that the court’s new policy in respect of non-compliance with rules, practice directions and orders is one of low tolerance rather than no tolerance.’”
83          There is no question in mind that it was appropriate to grant relief from sanctions for several reasons. They include the following: (a) the matters referred to by me in paragraphs 73 and 74, above; (b) the fact that the defaults have caused no, or no significant, prejudice to the Second Defendants. Although the Second Defendants complain that the signed witness statement of the Third Defendant was received late, they do not set out any specific prejudice caused to them as a result; (c) the fact that the defaults have not resulted in the trial having to be adjourned or caused any, or any significant delay, in completing it. Although I have ruled that this does not mean that the breach is not significant, it is, as I have said above, relevant to bear this factor in mind when considering the third stage; (d) the fact that it was open to the Previous Trustee and/or the Second Defendants, at any stage, prior to or during the course of these proceedings to obtain information concerning the Third Defendant’s involvement in the Joint Venture under section 366 of the Insolvency Act 1986, which they failed to do; (e) the case of the Second Defendants is not based upon any direct evidence which they can give about the circumstances of the events giving rise to the Negligence Claim but upon the material which they have obtained from conducting their own enquiries into the affairs of the Bankrupt and, on the facts, were unlikely to be able to produce material which controverted what the Third Defendant said, apart from testing his account on cross-examination; (f) the Third Defendant was one of the Joint Venturers and his evidence was an important aspect of the Claim, though, as I say at paragraphs 86 to 88, below, I found what he had to say to be of little assistance to me in my assessment and evaluation of the overall evidence I heard in the Claim; (g) the Third Defendant could have served the written evidence himself, rather than seek to do so through the First Claimant’s solicitors, though he may not have appreciated this because he was acting in person; and (h) if I found that the Joint Venture was a partnership and directed an account to be taken, the Third Defendant might benefit from the taking of the account if there is found to be due any money to him from the Settlement Amount or be liable to the Second Defendant (on behalf of the Bankrupt) and the First Claimant if there is found to be an amount due from him. In either case (i.e. whether he benefited or was disadvantaged from the taking of the account), it would have been be wrong for me not to hear what he had to say about his involvement in the Joint Venture.
84          I considered that excluding the Third Defendant’s written and oral evidence would have been a draconian consequence in the circumstances. The First Claimant was appropriately penalised by the order for costs made against him by District Judge Rich for the breaches.
85          I should add that even if I am wrong about the construction of the order of District Judge Rich, and had to dismiss the application of the First Claimant for relief from sanctions, I would nonetheless have been prepared, for the reasons summarised above, to allow the Third Defendant to give oral evidence at the trial, pursuant to the discretion vested in me under CPR 32.10. So far as the last recital of the District Judge’s order (“AND UPON IT BEING RECORDED that as matters stand, Mr Nirmal Tanna, the Third Defendant, may not give or be called to give oral evidence at the trial of this claim”) purports to say otherwise (i.e. that the sanction of not being able to rely upon the oral evidence applies without qualification), the order is incorrect as being inconsistent with the discretion given to the trial judge to allow such oral evidence to be adduced at the trial with his permission under CPR 32.10.
Application for relief from sanctions concerning Mr Thakrar’s witness statement
89          Mr Thakrar’s witness statement is dated 7 April 2020. It does little more than exhibit an email dated 16 March 2020 to Ms Narshi (which contained the substance of what he had to say about the Joint Venture) and reiterates the contents of that email.
90          The Claimant’s solicitors served that email upon the Second Defendants’ solicitors in order not to miss the deadline for service of witness statements. The circumstances in which that happened are set out in paragraphs 6 to 12 of Ms Narshi’s witness statement.
91          The Claimant’s solicitors should have made an “in-time” application to extend time for the service of that witness statement. They did not. In the circumstances, in order to be able to rely on that witness statement, they had to apply for relief from sanctions under CPR 3.9. They made that application in the same notice of application as the application for relief from sanctions in respect of the Third Defendant’s witness statement. I heard that application at the same time as the application for relief from sanctions concerning the witness statement of the Third Defendant over the telephone on 10 September 2020. The Second Defendants took a “neutral” stance (i.e. a stance of “no opposition”) to the application for relief from sanctions concerning Mr Thakrar’s witness statement. I allowed the application, though did not have time to give reasons for my decision because, through no fault of the parties, the telephone hearing which was arranged was delayed substantially and I was already running late for a trial which I had to start later that morning.
92          I said that I would give my reasons subsequently. I now do so. Given the Second Defendants’ neutral stance, they are only brief.
93          I do not consider that the breach was trivial or that it was not significant. In addition, the First Claimant’s solicitors appear again to have misconceived what they needed to do in order to be able to rely on Mr Thakrar’s witness statement. Rather than make an in-time application to extend time to serve his written statement, they thought that they could serve his email in place of a CPR-compliant witness statement. The requirement to comply with the CPR appear to have been regarded by them as unimportant. Miss Narshi is right to accept in her witness statement that it is not. It cannot be emphasised enough that the requirement to furnish a CPR-compliant statement is no empty formality, not least because there are important consequences for a witness if he says anything in it which he knows is deliberately false.     
94          There was then some delay in the First Claimant making the application. Some of the actual delay is attributed to Ms Narshi overlooking matters (plainly, not acceptable but often the case) and the Covid-19 crisis. In respect of the latter, it is right to point out that paragraph 4 of PD 51ZA – Extension of Time Limits and Clarification of Practice Direction 51Y – Coronavirus, issued on 2 April 2020, provides that in so far as compatible with the proper administration of justice, the court will, in respect of the period from 2 April 2020 to 30 October 2020 (when the Practice Direction ceases to have effect), take into account the impact of the COVID-19 pandemic when considering applications for an extension of time for compliance with directions, the adjournment of hearings, and applications for relief from sanctions.
95          Nonetheless, largely for the reasons I have indicated relating to the application for relief from sanctions in relation to the witness statement of the Third Defendant, which apply a fortiori to the witness statement of Mr Thakrar, it was appropriate for me to grant him relief from sanctions.